aa ry 
LIBRARY © ON THE ; 
OF THE 


UNIVERSITY of ILLINGIS 


RELATION TO THE PUBLIC WELFARE 


Changes in the Volume of Money 


AND ON 


MONETARY STANDARDS. 


By DR. FF. A. P. BARNARD. 


202 Proceedings of The American Metrological Society. 


ON THE RELATION TO THE PUBLIC WELFARE OF 
CHANGES IN THE VOLUME OF MONEY, 
AND ON MONETARY STANDARDS. 


During the past eight or ten years the world has been filled 
with a great outcry against the stupendous wrong said to have 
been done to the human race by the financial measures adopted | 
by certain governments, involving what is commonly called “the 
demonetization of silver.” The authors of those measures, and 
all others who have maintained their wisdom, have been denounced 
sometimes in terms of bitter vituperation, as designing men de- 
liberately aiming to build up the fortunes of the wealthy few at 
the expense of the suffering many ; and at other times in words 
of contemptuous pity, as the weak victims of a false philosophy by 
which they are misled to their own delusion and to the grave 
injury of their felowmen. It never seems to occur to the authors 
of these intemperate expressions that they are perhaps themselves 
under the influence of some slight hallucination which vitiates in a 
degree the clearness of their vision. The confidence with which 
they utter their judgments, is like that of the old prophets, who 
prefaced all their announcements with the unanswerable decla- 
ration, “Thus saith the Lord.” They speak in the absolute tone 
of men having authority. They disdain the language of hypo- 
thesis or conjecture. What they assert they assume to know. 
Those who differ from them, on the other hand, they treat as men 
without knowledge altogether ; men who put forward their own 
idle fancies instead of facts, and who live in a constant atmosphere 
of unreality. Regarding them in this light, they habitually speak 
of them as men without any proper acquaintance with the affairs 
of actual life, as unpractical men, or doctrinaires. This word 
doctrinaire involves a whole encyclopeedia of contemptuous mean- 
ing. It denotes a visionary, a pure theorist, a Utopian philo- 
sopher, whose notions, however correct or just they might be in 
some imaginary or impossible world, must be necessarily absurd 
and wrong in that particular and imperfect world in which it is 
our destiny to live. 


ERRATUM. 


On page 209, line 14, the word Corn should read Corn. 


‘ 2 E ma 5 < 
£ ‘ ES 
ea = 7 - = 
4 é * = ~ “ 
* — i = ane 
a tet = - 
t z = 
- = p , t, 
sagt 5 = - Joa 
: = S is 
4 os = 
= - Ss ‘ 
=f < = % z 
— = -S. = 
E be 5 = 
s tS + 


uUMiv. hib 


& OED 08. 


Proceedings of The American Metrological Socvety. 203 


Now there is good reason to believe that the truth is directly 
the reverse of what is here represented, and that these very 
oracular wiseacres are themselves the doctrinaires. We find them, 
for example, continually taking for granted certain propositions 
in regard to the effect upon the welfare of the masses of the 
people, of changes in the volume of the currency, and making 
these assumptions the basis of conclusions of a most sweeping 
character, when a very cursory examination of the actual facts of 
observation concerned in the question, will show the propositions 
themselves to be without substantial foundation, and to be mere 
fancies conceived in the imaginations of their authors to serve the 
purposes of their argument. 

The argument in the present case is something like the follow- 
ing: The demonetization of silver has diminished the amount 
of real money in the world by one-half. The consequence has 
been a universal fall of prices, and the consequence of a general 
fall of prices is invariably wide-spread suffering. Silver itself 
being reduced to a commodity of commerce, falls in price along 
with other things, and with its fall an immense amount of wealth 
is wantonly annihilated, And all this mischief has been done at 
the instigation of unprincipled men, who have managed to control 
the counsels of governments for the promotion of their selfish 
ends, to the disregard of the general good, and the great injury 
of the honest citizen. These assertions are not made in regard 
to the acts of distant governments and to the experience of other 
peoples, but in respect, especially, to the legislation of the 
American Congress in 1873 and 1874, and the influences which 


induced that legislation, and to the stagnation of business and 


the consequent sufferings of the industrial classes in our country 
during the last six or seven years. Now that this suffering has 
been great there can be no doubt, and that we have passed 


4 through a period of comparatively low prices is also true : but 


that these facts are traceable in any manner to the legislation of 
Congress affecting silver, is not only not certain, but is demon- 
strably false. For the humanitarian philosophers who call upon 
us to weep over the universal wretchedness which has been 
brought down upon our countrymen by the demonetization of 
silver in 1873, are compelled by their own principles to argue 


Y ok ha Wan 
me 


204 Proceedings of The American Metrological Society. 


that the immediate effect of that financial measure, in virtue of 
which it drew after it the imputed disastrous consequences, was 
to diminish enormously the volume of the money of the United 
States. Prices fell, they assert, because the volume of money was 
reduced. The volume of money was reduced by withdrawing 
from silver the character of money. The people suffered from 
the fall of prices, and thus the demonetization of silver was the 
cause of the suffering. 

Now, had it been the case that any considerable proportion of 
the circulating medium of the United States had been deprived 
of the character of money by the legislation of 1873 and 1874, 
the soundness of this reasoning would not necessarily follow, 
though the fact itself would be a factin harmony with the reason- 
ing; but such was not the case. For, the simple truth is, that, 
for nearly half century before that legislation took place, we had 
had no full legai tender silver in circulation at all. The only form 
of silver coin, which had been struck since 1853 having this legal 
tender character, was the silver dollar, and for sixty years there 
had not been ten million silver dollars struck in all. Moreover, 
the legislation referred to, so far from having been brought — 
about by dishonest influences exercised by interested men, was 
due to the advice of the finance officers of the government itself; 
for the very sufficient reason that as prices then stood, silver 
bullion uncoined was worth two or three per cent. more than the 
same metal coined into dollars; so that all the dollars issued 
from the mint were immediately exported, or melted up and con- 
_ verted into bullion again. 

While this state of things lasted, and it did last for two or three 
years, there was no clamor about demonetization; but when in 
1876 the price of silver fell rapidly in the London market, the 
explosion was sudden and violent. The discussion of the dollar 
complicated itself at once with the question of the resumption of 
specie payments in the United States, for which, by an act of 
Congress passed in 1875, the Ist of January, 1879, had been fixed 
as the definite day ; and it was further embarrassed by the up- 
springing of a powerful party bent on resisting all resumption, 
and on maintaining a currency exclusively of paper forever. The 
success of this party, and it is a party which at times has appeared 


Proceedings of The American Metrological Society. 205 


truly formidable, would have deprived the silver question, and 
the gold question no less, of all interest so far as this country is 
concerned. But to a certain extent the same motives actuated 
alike the champions of fiat money and the advocates of the re- 
monetization of silver. No earnest desire for the reappearance 
of silver manifested itself until silver became cheap, and no fiat- 
money party could be possible if the cheapness of fiat money 
were not sure to be phenomenal. If all commercial exchanges 
were conducted now, as they appear to have been in primitive 
times, on the principle of payment on delivery, neither cheap 
silver nor depreciated paper would be tolerated for a moment 
by either buyer or seller. In the actual state of the world it 
happens, however, that into many of the transactions of com- 
merce or of ordinary life there enters the element of time ; that 
is to say, for benefits received the receiver engages to return an 
equivalent at a later day. And this equivalent is money. Any- 
thing that makes money cheap—that is, diminishes its value rela- 
tively to commodities—is favorable to the debtor ; and therefore 
the most vociferous clamorers for fiat money are always found 
among the debtor class. For a similar reason the remonetiza- 
tion of silver when silver is cheap, as at present, finds favor with 
those who were so indifferent to its demonetization when it was 
dear, as in 1873, that they allowed this abominable measure, as 
they style it, to be at that time carried without lifting a finger to 
oppose it. Now, as there is hardly a man in the community who 
has not at one time or another some outstanding liability pressing 
upon him, the debtor class is necessarily very large. But for the 
same reason the creditor class is large also ; and most men are 
at once debtors and creditors. And hence the assumption which 
is so often made in the discussion of this question, that the com- 
munity is composed of two distinctly definable classes of people 
having interests diametrically antagonistic to each other, is un- 
tenable ; but, supposing it true, the further assumption that 
these two classes are not equally entitled to the sympathies of 
statesmen and the protecting care of the State, is more indefensi- 
ble still Yet we hear it constantly represented that any mea- 
sure which may by possibility bear heavily though only tem- 
porarily on the so-called debtor class—or perhaps we may rather 


206 Proceedings of The American Metrological Society. 


say, any measure which does not distinctly tend to lighten the 
burdens of that class at the expense of the other—is incapable of 
justification, if not utterly reprehensible; while on the other hand 
a measure from which the creditor class suffers is regarded, in the 
same quarters, with a complacency which no attempt is made to 
disguise. This peculiarity may perhaps be accounted for by 
considering that in the vulgar mind the creditor class appear to 
be confounded with the rich, the capitalists, the “bloated bond- 
holders,” and all others whose sin it is to have been successful 
in business ; while the debtor class are supposed to be the needy, 
the hard-working poor, the small farmers, farm-laborers, mecha- 
nics, and manufacturing operatives. And these last in every com- 
munity, are, no doubt, largely in the majority. Unfortunately 
also this majority are only too much predisposed to think ill both 
of the designs and of the actions of those who have been more 
favored by fortune than themselves. But the truth is that the 
classification above indicated is totally erroneous and false. It 
is an impossibility to divide the people into two such well-defined 
and opposite classes. Scarcely can an individual anywhere be 
found who is not in one relation or another, at the same time a 
debtor and a creditor. But admitting as just the arbitrary line 
of division above assumed, the position of the two classes des- 
cribed should, for the purposes of this argument, be directly re- 
versed ; since in a comprehensive view of the conditions affecting 
the question, if any class is, in this country, especially the creditor 
class, it is the poor. This is so because, in defining this class, it 
is.an error to regard it as limited to such as are looking for the 
receipt of dues long outstanding ; it embraces, on the contrary, 
all that immensly greater number who have debts becoming due 
to them every day, from the labor of their hands or the exercise 
of their skill in every department of industry ; while on the other 
side we have as debtors all the banks, on account of their issues of 
promissory notes and on account of the vast deposits of the money 
of their customers in their vaults; all of the great joint-stock 
corporations engaged in manufacture or transportation, as toward 
the holders of their bonds and stocks, and toward the innumerable 
company of their employés; all the great importing merchants 
and jobbers to the bankers who discount their bills and other 


Proceedings of The American Metrological Society. 207 


securities, and to the mariners who navigate their vessels ; and 
finally most municipal corporations and the State itself. 

To enumerate more particularly, we may set on the creditor 
side— 

1. Men and women who maintain themselves by their daily 
labor, or who, in common language, “ work for wages.” 


2. Persons in professional life depending on fixed salaries, 
including clergymen, teachers of all grades, and the entire civil, 
military and naval service. 


3. Employés in mercantile houses, banks and business offices 
of all kinds. 

4. Annuitants, embracing the holders of all descriptions of 
stocks and bonds, including those of the United States, of the 
State governments and of municipal corporations, as well as those 
of private banking, railroad, mining and manufacturmg com- 
panies ; in one or another of which forms, the small savings of 
multitudes of individuals in narrow circumstances have been in- 
vested in the hope of security. 

5. Merchants, whether in the wholesale or the retail trade, 
embracing among the latter a countless number of small shop- 
keepers all over the country. 

6. Mechanics in every branch of handicraft, who usually keep 
running accounts with their customers. 

7. Banks, as holders of commercial paper, and other forms of 
bills receivable. 

8. The State itself, as the receiver of taxes. 

On the debtor side we may enumerate— 


1. The State, again, to the entire amount of the annual appro- 
priations made for the support of the government. 


2. Banks to the amount of their stocks, deposits and circu- 
lation. 

3. Borrowers on ordinary commercial paper, or on mortgage 
of real estate. 

4. Small tradesmen toward the wholesale merchants, and the 
customers of both on open account. 


208 Proceedings of The American Metrological Society. 


Holders of real estate on lease, whether in town or country. 
Purchasers of stock, farms, implements, tools, &e., on credit. 
Employers of all classes toward those dependent on them. 


DAMN 


The whole people as tax payers. 


The very attempt to make an enumeration like this, proves at 
once the impossibility of drawing such a line of demarcation among 
the people. There is no class of the community which as a whole 
can be placed with propriety on either side of the line. And 
though it may be admitted that there are individuals in every 
class whose temporary interests may sometimes be more on one 
side than on the other, yet, as has been already remarked, there 
is scarcely one who is not in certain of his relations at once a 
creditor and a debtor. 

Now if we consider the effect of the rise and fall in the value 
or purchasing power of money, we shall see clearly enough that 
it cannot possibly be such as we are commonly asked to believe. 
A rise in purchasing power which may be occasioned by a con- 
traction of the currency, if we suppose it to affect the creditor 
favorably and the debtor prejudicially, affects every individual 
more or less in both ways at the same time. But how is this 
effect produced ? 

Its first manifestation appears in a general fall of prices. The 
immediate result is a reduction in the cost of living which is felt 
beneficially by all who maintain themselves by the labor of their 
hands, and all who depend on salaries or fixed annuities. For 
wages and salaries do not fall synchronously with prices; but 
their reduction, when it comes, follows a long time after, and 
does not come at all unless the rule of low prices is at leneth 
permanently established. Even when it comes, it is only pro- 
portioned to the fall of prices; so that the income, though re- 
duced, stands once more to the cost of living in the same relation 
as before, and the individual in the end neither gains nor loses. 
Mr. Bagehot illustrates this point admirably in the following 
remarks extracted from his book on Lombard Street : 

“ In 1867 and the first half of 1868, corn was dear, as the follow- 
ing figures show: [Here follows a table showing the average 
monthly price of wheat from December 1866 to July 1868. | 


Proceedings of The American Metrological! Society. 209 


* From that time it fell, and it was very cheap during the whole 
of 1869 and 1870. 'The effect of this cheapness is great in every 
department of industry [the author is writing contemporaneously] 
the working classes, having cheaper food, need to spend less on 
that food and have more to spend on other things. In conse- 
quence there is a gentle augmentation of demand through almost 
all departments of trade. And this almost always causes a great 
augmentation in what may be called the instrumental trade,—that 
is, in the trades which deal in machines and instruments used in 
many branches of commerce, and in the materials for such. Take 
for instance, the iron trades: [Here follows a comparison of the 
exportation of iron in the years 1869 to 1870 with the same in 
the years 1867 and 1868. | 

“ That is to say cheap coin (in England), operating throughout 
the world, created new demand for many kinds of articles— the 
production of a large number of such articles being aided by iron 
in some of its many forms—iron to that extent was exported, and 
the effect is cumulative. The manufacture of iron being stimu- 
lated, all persons concerned in that great manufacture are well 
off, have more to spend, and by spending it encourage other 
branches of manufacture, which again propagate the demand ; 
they receive and so encourage industries in a third degree de- 
pendent and removed.” 


Nothing could make it more clearly evident than this, how 
true it is that the fall of prices—that is to say, the rise in the 
value of money in reference to commodities—is an unqualified 
blessing to the great majority of the population whom it affects, 
that majority on whom falls the heaviest portion of the world’s 
daily toil. 

Among other classes who may be benefited by the fall, may be 
named merchants and handi-craftsmen, provided they can collect 
their dues; but on the other hand they are often largely losers 
by their defaulting debtors. The same may be said of banks, 
and of all lenders of money. It is a familiar experience to hear 
banks and money lenders denounced with bitterness by dema- 
‘gogues, who are accustomed to treat the possession: of accu- 
mulated capital as a wrong to mankind. Yet it'is only by such 


210 Proceedings of The American Metrological Society. 
Ds aR , 

accumulations that business enterprise can be encouraged, pro- 
duction stimulated, and the industrial activity of the world kept 
alive. <A widely prevalent, perhaps nearly universal, but entirely 
mistaken, belief appears to exist that any considerable increase 
of the money of a country brings necessarily with it blessings in 
like proportion ; or that, in difficult crises, such an increase sud- 
denly made may save a people from disaster. Many even now 
believe that the unauthorized re-issue of between twenty and 
thirty millions of retired greenbacks made by Secretary Richard- 
son in the winter of 1873-4, prevented the heavy blow which 
then fell upon the prosperity of the country from resulting in a 
ruinous crash. But if such was really its effect, it was because 
it wasa contribution to swell those masses of accumulated capital 
which are so frequently made the subject of popular denuncia- 
tion. Applied to strengthen those masses, and so to maintain and 
forward the great operations of commerce, manufacture, and in- 
dustrial enterprise generally, which were then in danger, it bene- 
fitted the whole country by keeping the entire machine in action. 
Had it been distributed pro rata among all the people, in accord- 
ance with communistic views of justice, it would have enriched 
each individual only by a small fraction of a dollar and would 
have been productive of no sensible benefit whatever. 

But banks and money lenders are the instrumentalities by 
means of which the capital of the country is put where it wil! do 
the most good, by promoting with effect that general prosperity 
in which every citizen, whether rich or poor, is equally participant. 
To decry banks and money lenders is to denounce the very 
fountain-springs of national wealth and national progress. We 
had once a Chief Magistrate who was so little cognizant of this 
truth, as to be willing to contribute by his voice and the influence 
of his high station to foster the prejudices of the vulgar against this 
class of institutions; and who when as a conseqnence of his extra- 
ordinary financial measures, the commercial world seemed about 
to be overwhelmed in a general ruin, expressed his satisfaction 
with the result, in the remarkable. declaration that “men who 
trade on borrowed money ought to break.” Such was not the 
opinion of that eminent economist, the late Walter Bagehot, one 
of the highest authorities on finance that England has produced. 


Proceedings of The American Metrological Society. 211 


This distinguished writer, in his work on Lombard Street, shows 
on the contrary very clearly, that the most advantageous mode 
of prosecuting great commercial enterprises is to “ trade on bor- 
rowed capital ;” and without borrowing, in the present age, the 
world’s large commerce cannot be carried on. Moreover, in 
Lombard Street, and probably in Wall Street, not only do mer- 
chants trade on borrowed capital, but money-lenders lend on 
borrowed capital—that is to say, they discount commercial bills 
with money which they have themselves borrowed from the banks, 
profiting only by such differences of interest as they can secure. 
These bill-brokers, if when the value of money rises, their customers 
default, must themselves become defaulters to the banks ; and 
thus brokers and banks, though equally in the class of creditors, 
are liable to be sufferers together through a change which is 
commonly supposed to be especially favorable to their class. 

The State, in the character of a creditor, is favorably affected 
by the rise in the value of money, because it can make its con- 
tracts for supplies and constructions on more advantageous terms, 
and thus make its revenues go further. It is enabled also to 
reduce taxes, and thus, though that result is not immediate, in 
the end to relieve to a sensible degree the burdens of all the 
people. 

On the debtor side, among the heaviest sufferers, though com- 
monly estimated to be gainers in consequence of the rise in the 
value of money, are banks, which finding their deposits drawn 
down, are obliged to contract their loans and reduce their cireu- 
lation, and thus through the consequent diminution of their 
business find their profits falling off, while they are further hable 
to losses by default on the part of borrowers. The State asa 
debtor, having its revenues largely dependent upon commerce, 
may find its receipts falling below the estimates; but against this 
is to be reckoned the offset on the part of the people that the 
amount drawn from them in taxes is diminished by the whole 
amount of the deficiency. 

The class of debtors, however, who suffer most, are undoubt- 
edly those who by misfortune or losses have become burdened 
with liabilities which they could not avert; those who by impru- 
dence have mortgaged their property for loans on hopes or 


212 Proceedings of The American Metrological Society. 


prospects which have proved fallacious, and those who have em- 
barked in rash speculations or doubtful enterprises which have 
culminated in disaster. All these cannot equally command our 
sympathy. The unfortunate are not necessarily unfortunate be- 
cause of the change in the value of the money. Misfortunes 
happen as well during a state of general prosperity as in one of 
general depression. Speculators and adventurers enter upon 
their schemes in a spirit of gambling, and with their eyes open. 
They know the hazards they incur, and their disasters are rarely 
undeserved. The merely imprudent are certainly entitled to 
commiseration; but it does not follow that on their account the 
whole system of public economy should be subverted. It is un- 
derstood that, among the farmers of the West, many, perhaps a 
majority have encumbered their lands with mortgages either at 
the time of original purchase, or later in order to raise money to 
enable them to enlarge the scale of their agricultural operations. 
The interests of this class naturally led them to oppose the re- 
sumption of specie payments ; since with legal tender currency, 
thirty per cent. or more below the money of the world in value, 
they could by the use of it, more easily lift their mortgages. Those, 
moreover, of the same agricultural class who were not thus 
burdened, went naturally with them, because resumption meant 
a fall in the prices of farm products. It is thus easy to account 
for the strength of the Greenback Party in the West, and for the 
intensity of the struggle through which it was necessary for the 
Nation to pass in order to secure resumption. And when resist- 
ance to the will of the people on this subject began to grow 
hopeless, we have here likewise an explanation of the power 
which the silver remonetization movement so suddenly developed; 
since, could. a bill like Mr. Bland’s have been forced through 
Congress, resumption would have been but a half way resump- 
tion, and debts might still have been scaled to the extent of fifteen 
per cent. instead of thirty. 

In what precedes it has been attempted to jel wae are the 
effects to be naturally expected as results of a rise in the value, 
or an increase in the purchasing power of money. In the oppo- 
site case of a fall in value, we may reasonably.look to see these 
effects reversed. And this is what actually takes place. As the 


Proceedings of The American Metrological Society. 213 


increasing value of money betrays itself in a general fall of prices, 
so a diminution in the same value is made similarly evident by a 
corresponding rise of prices. Mr. Bagehot has pointed out how 
these changes are sure to alternate, and how after a period of 
depression and low prices, a period of high prices is sure to follow, 
and has in the following passages extracted from his Lombard 
Street, traced intelligently the consequences of such a reaction: 


« A general rise of prices is a rise only in name ; whatever 
any one gains’ on the article which he has to sell, he loses on 
the article which he has to buy, and so he is just where he 
was. The only real effects of a general rise of prices are 
these : first, it straitens people of fixed incomes who suffer as 
purchasers, but who have no gain to correspond ; and secondly, 
it gives an extra profit to fixed capital created before the rise hap- 
pened. Here the sellers gain, but without any equivalent loss as 
buyers. Thirdly, this gain on fixed capital is greater in what 
may be called the industrial “implements,” such as coal and iron. 
These are wanted in all industries, and in any general rise of 
prices they are sure to rise much more than other things, Every- 
body wants them ; the supply cannot be rapidly augmented, and 
therefore their price rises very quickly. But lo the country as a 
whole, the general rise of prices is no benefit atall ; it is simply a 
change of nomenclature for an identical relative value of the same 
commodities. Nevertheless, most people are happier for it ; they 
think they are getting richer though they are not. And as the 
rise does not happen on all articles at the same moment, those to 
whom it first comes gain really; and as at first every one believes 
that he will gain when his own article is rising, a buoyant cheer- 
fulness overflows the mercantile world.” 


In these two last sentences we have the true secret of the 
popular delusion which confounds a general rise of prices with 
personal prosperity. It is only a delusion, for the only benefit 
that comes with the rise is, as is here shown, only partial and 
momentary, or as the same author expresses it further on, “ this 
prosperity is precarious as far as it is real, and transitory in so 
far as it is fictitious.” Moreover, what Mr. Bagehot says of the 
hardship of a general rise of prices to persons of fixed incomes, 


214 Proceedings of The American Metrological Society. 


may be extended to the entire class of those who work for wages. 
As in a time of falling prices, wages are the last to fall, so ina 
time of rising prices they are the last to rise; and in the rise they 
even drag much farther behind than in the fall. It is natural 
that it should be so; for as the interest of employers is on the 
side of low wages and is opposed to high wages, they are more 
ready to act when they can gain by action, than when they lose. 

Contrary, therefore, to what is continually inculcated upon us 
by a certain class of writers on this subject, the greatest good of 
the greatest number is far from being prejudiced by a rise in the 
value of money or enhanced by a fallinthe same value. Further 
than that, there are evils inseparable from the latter event, which 
often affect profoundly the general welfare. In the first place, 
as the value of money falls because there is much of it in the 
market, there results a great facility and therefore a great in- 
crease in borrowing, and this leads again to an excess of produc- 
tion, or what is called over trading. Mr. Bagehot describes this 
process as follows : | 


“Such a period naturally excites the sanguine and the ardent ; 
they fancy that the prosperity they see will last always, that it is 
only the beginning of a greater prosperity. They altogether 
over estimate the demand for the article they deal in, or the work 
they do. They all in their degree—and the ablest and cleverest 
the most—work much more than they should, and trade far above 
their means. Every great crisis reveals the excessive specula- 
tions of many houses which no one before suspected, and which 
probably had not begun or had not carried very far those specu- 
lations, till they were tempted by the daily rise of Pa and 
the surrounding fever.” 


The writer goes on to point out that the case is made worse 
because the fever often extends to saving persons who, though not 
_ bold enough to project operations of their own, become seized 
with what he calls ‘an investing mania ;” that is, they buy stocks 
in bubble companies “just as they did in the time of the South 
Sea mania.” He adds: “At the very beginning of adversity, the 
shares in the companies created to feed the mania are discovered 
to be worthless; down they all go, and with them much of credit.” 


Proceedings of The American Metrological Society. 215 


Another evil is that, “the good times too of high:prices almost 
always engender much fraud. All people are most credulous when 
they are most happy; and when much money has been made, when 
some people are really making it, there is a happy opportunity 
for ingenious mendacity. Almost every thing will be believed 
for a little while; and long before discovery, the worst and most 
adroit deceivers are geographically or legally beyond the reach 
of punishment.” 

These considerations suggest to us the propriety of discount- 
ing very largely upon the assertions of those who are perpetually 
haranguing us upon the disastrous results to the prosperity of 
our country of the reduction in the volume of money among us 
in consequence of the demonetization of silver. It was predieted 
to us that the consequence would be an extraordinary fall of 
prices in every branch of trade. In fact, it has been asserted and 
is perhaps proved by evidence derived from reports of the state 
of the markets in New York, from time to time, that a great fall 
did actually take place between 1876 and 1879; and this has been 
attributed to the remonetization of silver in 1873, no less than to 
the threatened resumption of specie payments fixed by law for 
the first of January of the year last named. The second of these 
causes was a known and real one. Without defeating resump- 
tion, its operation could not have been averted, nor was it desir- 
able that it should be. The effort to defeat resumption was 
accordingly prosecuted with an earnestness which, in parts of 
the country, approached almost to frenzy. It happily failed and 
prices accordingly went down. But there were other causes be- 
sides resumption conspiring to the same result, chief of which was 
the complete stagnation of industrial activity, growing out of the 
almost universal loss of confidence between business men. More- 
over, it is the tendency of all movements in the economical and 
social as well as in the physical world, to pass the point of equi- 
librium ; and hence it is quite intelligible that the temporary fall 
of prices may have been greater than the mere appreciation in 
the value of the greenback currency would have justified. But 
when resumption had been once accomplished, confidence returned 
with it, restoring health to industry, and manifesting its salutary 
influence by raising prices again to their just level, 


216 Proceedings of The American Metrological Society. 


From what has been said it is evident that, so far as the general 
welfare of the community is concerned, neither a rise in the 
value of money, nor a fall in the value of money can be regarded 
as a benefit; for though in the former case, numbers are deluded > 
with the idea that because they are selling at high prices they are 
better off, and in the latter they are alarmed lest the fall of the 
prices of their commodities will make them poor, yet, taking the 
community through, both hopes and fears are equally unfounded; 
and when matters adjust themselves to the new plane of prices, 
everything goes on as it did before the change, and no one is 
either worse off or better. But during the progress of the change 
more are losers than gainers, whether the tendency be up or 
down; and hence the condition of the highest prosperity which a 
nation can enjoy is that in which prices remain stationary. In 
such a state of things, business steadily and healthfully grows, 
and the volume of the currency should grow in no greater pro- 
portion, nor any less. But this growth will in the nature of the 
case be gradual, and it cannot be stimulated beyond its natural 
and healthful development by sudden and vast accessions to loan- 
able capital without provoking hazardous speculations and engen- 
dering wild and reckless schemes of which the results cannot 
fail to be deplorable. 


The dependence of the prosperity of a people upon the steadi- 
ness of the volume of money and its gradual and uniform increase 
in due proportion to the growth of the operations of industry, is 
well set forth in the report of the Congressional Monetary Com- 
mission of 1876, presented by the chairman, Senator John P. 
' Jones, at the session of the forty-fourth congress, as follows: 


“Tt is in a volume of money keeping even pace with advancing 
population and commerce, and in the resulting steadiness of 
prices, that the wholesome nutriment of a healthy vitality is to be 
found. The highest moral, intellectual and material development 
of nations is promoted by the use of money unchanging in its 
value. That kind of money, instead of being the oppressor is 
one of the great instrumentalities of commerce and industry. It 
is as profitless as idle machinery, while it is idle; differing from 
all other useful agencies, it cannot benefit its owner except when 


Proceedings of The American Metrological Society. 217 


he parts with it. It is only under steady prices that the produc- 
tion of wealth can reach its permanent maximum and that its 
equitable distribution is possible. Steadiness in prices increases 
labor to all and exacts labor from all. It gives security to credit, 
and stability and prosperity to business. It encourages large 
enterprises requiring time for their development, and crowns with 
success well matured and carefully executed plans. It discour- 
ages purely speculative ventures, and especially those based upon 
disaster. It encourages actual transactions rather than gambling 
on future prices. It metes out justice to both debtor and creditor, 
and secures credit to those who deserve it. It prevents capital 
from oppressing labor, and labor from oppressing capital, and 
secures to each its just share of the fruits of industry and enter- 
prise. It secures a reasonable interest for its use to the lenders 
of money, and a just share in the profits of production to the 
borrower. It keeps up the distinction between a mortgage and 
adeed. It insures a moderate competence to the many, rather 
than colossal fortunes to the few at the expense of the many.” 


All these blessings unquestionably attend the steadiness of an 
unvarying scale of prices both of commodities and of labor in 
any community; but it is not alone by the preservation of a uni- 
form volume of currency, or of a volume in constant proportion to 
population and wealth, that such a permanently uniform scale 
of prices can be maintained. Other causes besides the volume 
of the currency continually disturb it. We have seen, for ex- 
ample, how in consequence of a bad harvest, the price of wheat 
may be raised in England; and how the disturbance of the scale 
at this one point may propagate a disturbance through the whole 
range of prices. While it is well, therefore, to do nothing which 
may suddenly and largely affect the volume of the currency, we 
need not flatter ourselves that this precaution will suffice to avert 
those occasional periods of stagnation which so many other 
causes are continually conspiring to bring to pass, when industry 
flags and prices fall, and there comes up from every side the 
lamentation over the hardness of the times. | 


To return to the condition of our country in 1876, when the 
downward tendency in prices above referred to began to be marked. 


218 Proceedings of The American Metrological Society. 


That tendency was inevitable, from the fact that the country 
was at the time in an entirely abnormal condition, a consequence 
of the terrible struggle through which we had so recently been 
compelled to pass for the preservation of the life of the nation. 
The precipitation upon us of that struggle compelled us suddenly 
to abandon the use of real money, and to replace it by a currency 
of no intrinsic value, maintained in circulation only by the force 
of law. The vast expenditures necessary for the prosecution of 
the war swelled enormously the volume of this artificial medium 
of exchange; the universal demand for provisions for the subsis- 
tence of the armies in the field raised rapidly and largely the 
prices of farm products; and the continual call for more and 
more of the material of war, stimulated all branches of mechanical 
industry to the highest point of production ; while the diversion 
from the pursuits of peace of the most effective portion of the 
industrial population to meet the military exigencies of the time, 
produced its natural effect upon the rates of wages. The years 
of the war were years of extravagance and reckless adventure ; 
the evil inheritance of the habits then engendered fell upon the 
years that followed; and under an outward appearance of pros- 
perity which both surprised and deceived the people, sowed the 
seeds of that harvest of disaster which finally came in overwhelm- 
ing shape in 1873. The depreciation of the currency was then | 
fifteen per cent. and nominal prices were proportionally high, 
From that point we had an upward struggle to bring our 
legal tender notes up to the par to which the resumption 
act passed a little later, was destined inexorably to force 
them, and the fall of prices was a result wholly inevitable, 
without reference to any supposable effects of the demonetiza- 
tion of silver—if any such there were—conspiring to this result. 
It is true that, toward the end, this fall became somewhat greater 
than the necessary appreciation of greenbacks would have re- 
quired; and it has been accordingly argued that silver had not 
fallen in reference to commodities, but that gold had risen. 
Thus Mr. Weston quotes statements from the New York Public, 
in which it is affirmed that, between 1876 and 1879, the general 
fallin prices amounted to nineteen per cent., while the fall in 
premium on gold was only ten and a half per cent., which leaves 


Proceedings of The American Metrological Society. 219 


eight and a half per cent. apparently chargeable to the rise in the 
value of gold.* And further on he adds in reference to this :— 
“The rise in the value or purchasing power of gold, and the 
simultaneous approximation of the value of the greenback to the 
value of gold, are the upper and nether mill-stones which have 
ground debtors and mortgageors to powder.”+ But this is only 
an example of the tendency already referred to, in all movements 
to pass the point of equilibrium. Prices fell lower than they 
ought to have fallen, and for the moment failed to be governed 
by the actual value of money. The proof of this is in the fact 
that they did not remain for an hour at this point of extreme de- 
pression. On the Ist of January, 1879, resumption became an 
accomplished fact, and the prostration of prices which the effort 
to resume had produced, had been carried to the extreme of pos- 
sibility. If the effect had been permanent, it might have been 
fair to argue from it an actual increase in the value of gold as 
money. But no sooner had the uncertainty and apprehension 
which always existed in the public mind, so long as we continued 
to have no such thing as a standard of value in our business 
transactions, been removed by successful resumption, than the 
natural reaction took place at once, and prices began rapidly to 
rise. The director of the mint, in his annual report for the year 
1879-80, furnishes a price table, which on this subject is highly 
instructive. This table gives the comparative prices of one hun- 
dred leading articles of domestic production exported from the 
United States for the years 1870, 1879 and 1880 up to June. It 
appears that in comparing 1879 with 1870, the prices of all the 
articles in the list, except twelve, have fallen—a fact which con- 
firms the foregoing statement of Mr. Weston. The exceptions, 
however, are rather remarkable; pig-iron, sheep, wool and horses 
being among the number; sheep having advanced nearly eighty 
per cent., and horses more than one hundred and sixty. The 
comparison of 1880 with 1879: shows, however, a singularly dif- 
ferent result. In sixty-five cases out of the one hundred, prices 
have advanced ; and in mayy instances, among which we find 
again pig-iron, horses and wool, the advance is very great. The 


* Weston, The Silver Question, p. 70. 
+ Idem, p. 78. 


220 Proceedings of The American Metrological Society. 


advance in iron extends to nearly all the forms of that metal, 


including bar-iron, iron rails, boiler plate and sheet and band. 


iron. Rice also, which in 1879 had advanced twenty-two per 
cent. upon 1870, has advanced additionally fifty per cent. upon 
1879. Nearly all sorts of provisions have largely advanced, in- 
eluding all varieties of flour, aud both fresh and salted meats. A 
remarkable example occurs in the price of hops, of which from 
1870 to 1879, the advance was seventy-two per cent., and from 
1879 to 1880, one hundred and sixty per cent. further. 


The resumption in 1879 was therefore, a return to the state of 
commercial health from a state of commercial disease and threat- 
ened decline. It took place in spite of the predictions of the 
impossibility of effecting it for want of a sufficient gold reserve 
to make the operation safe. The remonetization of silver was 
forced upon Congress and the country mainly by the argument 
that unless we resumed upon silver we could not resume at all. 
Even Mr. Boutwell, who as a member of the Silver Commission of 
1876 dissented from the majority, and argued against remonetiza- 
tion, was cited in the majority report of that Committee as having 
in his place, in the Senate, ‘scouted the proposition that it was 
possible to obtain even $100,000,000 in gold by the sale of the 
bonds for resumption or for any other purpose.”* Mr. Boutwell 
it is true, did in the speech referred to, present a pitiable 
spectacle of the manner in which, as Secretary of the Treasury, 
he had allowed himself to be dictated to by the bank of England. 


« The bank of England,” he said, “ foreseeing that there would 
be an accumulation of coin to the credit of the United States 
which might be taken away bodily in specie, gave notice to the 
officers of the Treasury Department of the United States that the 
power of that institution would be arrayed against the whole 
proceeding, unless we gave a pledge that the coin should not be 
removed, and that we would invest it in bonds of the United 
States as they were offered in the markets of London.” And then 
he weakly adds, “we were compelled to comply.” 

Further on, the ex-Senator continues :— 


** There is another fact known to all. We recovered at Geneva 


* Report of Monetary Commission, created Aug. 19, 1876, p. 109. 


Proceedings of The American Metrological Soctely. 221 


an award against Great Britain of $15,500,000, When this claim 
was maturing the banking and commercial classes of Great Britain 
induced the government to interpose, and by diplomatic arrange- 
ments, through the State department here operating on the Trea- 
sury department, secured the transfer of securities and thus avoided 
the transfer of coin. In the presence of these facts, is it to be 
assumed, for a moment, that we can go into the markets of the 
world and purchase coin with which we can redeem, four, three, 
two, or one hundred million outstanding legal-tender notes ? ” 


In reading this, one cannot but ask himself what would have 
happened, in case these delicate “ diplomatic arrangements” had 
failed, and the President of the United States had intimated that 
it would be convenient to us to have that small amount in gold. 
England had assented to the award, and had agreed to pay the 
money. Would she have refused ? 


But this talk about not being able to obtain gold for resump- 
tion or for any other purpose, is arrant nonsense. Any people 
or any man can obtain anywhere and at any time all the gold he 
wants, provided he has either of two important conditions in his 
favor, viz.: 1st. A perfectly established and unimpeachable credit, 
or, 2d. The possession of an unlimited amount of commodities 
which the world must buy or perish. Both these conditions 
were in our favor, and in spite of croakings from birds of ill-omen 
in politics, and in spite of the powerful influences exerted to 
defeat the object, we got the money and we are getting more of 
it yet—more even than we need, or than it is desirable for us to 
have, every day. 


In spite of the remonetization of silver, we resumed on gold. 
Remonetization, we were promised, would make silver as good as 
gold. It has not done it yet and will not do it; but the opera- 
tion of the existing silver law will compel the Treasury to go on 
buying and coining this metal’ indefinitely, till gradual as the 
process may be, the end will come at last, and there can be but 
one possible ending—the entire depletion of the Treasury of all 
its gold, and the replacement of that store by an equal nominal 
value of silver. Should a bill like the Bland Bill become a law, 
the process will be no longer gradual. ‘The fall in the value of 


222 Proceedings of The American Metrological Society. 


money will be precipitous, and the resulting disaster enormous 
beyond the power of computation. It willbe buta slight allevia- 
tion of the general gloom to know that a few debtors and mort- 
gageors have escaped the calamity which has befallen the rest of 
their fellow citizens. 

In spite of the fact that the remonetization law of 1878 was 
undoubtedly passed in the expectation, and with the intention on 
the part of its authors, that silver should be used under it in the 
redemption of the legal tenders, itis doubtful whether, in point of 
law, the United States has any right to tender silver in such re- 
demption. The language of the law makes the silver dollar “a 
legal tender for all dues public and private.” The government 
is therefore, bound to receive it in all dues payable to itself ; but 
the law of 1873 declared the gold dollar of 25.8 grains nine-tenths 
fine to be “the unit of value,” and the obligation of the United 
States to pay dollars are obligations to pay such units of value— 
that is, such coins as the government has itself thus defined to be 
dollars ; and this obligation is not satisfied by the payment of 
other coins which have not that character, however under com- 
pulsion of law, individuals may be obliged to receive them in 
transactions between themselves. 


This question is, however, apart from the object of the present 
paper, of which the design has been to show that much of the 
sentimental reasoning which has been thrust into the discussion of 
the silver question, is fallacious in its assumptions and erroneous 
in its conclusions. It will also, it is hoped, contribute somewhat 
to bring to view the impropriety of transforming a great problem 
of political economy into a controversy about doubtful questions 
of purely humanitarian interest and practical benevolence. 


We certainly have gold enough for our own purposes, and we 
have had enough for nearly half a century. England has had 
enough for hers for two centuries. By relinquishing silver we 
leave the more for those who need it. Suppose the people of 
New York were to substitute universally the electric light, now 
growing so popular, in the place of gas. They would leave so 
much larger an amount of coal for the gas-supply of other cities. 
Or, to take a more strictly analogous example, suppose the people 


> 


Proceedings of The American Metrological Society. 223 


of the United States should with one consent abandon the use of 
wheat as food in favor of some other breadstuff, say Indian corn: 
Though by doing so they would decibize this grain (if the word 
is allowable) for themselves, food would be more abundant for 
the rest of mankind; but in case the price of wheat should there- 
fore fall, we should hardly expect other nations to turn upon us 
with the complaint that we had made their food cheaper to them. 
Now, even though we leave silver alone, there are multitudes to 
whom this metal is almost as much a necessity as their daily 
food. And among these we must not forget that, besides the 
semi-civilized millions of the East, there have to be counted also 
the people of the Austrian Empire in Europe, who still hold to 
the single silver standard, and those of the Turkish Empire in. 
which coinage is in the ratio of 1:15 ; and which is certain, there- 
fore, if specie payments shall ever there be successfully main- 
tained, to draw silver from all neighboring states; to say nothing 
of the vast population of Russia among whom the double standard 
prevails, and who have shown no disposition as yet toward gold 
monometallism. Moreover, if the Latin Union alone would return 
to its professed preference, the double standard, the prostra- 
tion of the silver market would be at once relieved without the 
need of any help from us. The ills of which the French bimetal- 
lists complain, so far as they are occasioned by governmental 
acts interfering with the coinage, they have brought upon them- 
selves ; and it is entirely in their own power, if they will, to throw 


them off. 
But it is argued that though we may have gold enough now 


for our purposes, we shall find ourselves pinched in case all the 
other nations should engage with us in a general scramble for 
this metal. This danger is entirely imaginary ; but suppose that 
such scramble should occur, what amount of gold should we 
need? It must be remembered that our people make very little 
use of money in the form of coin. Except for the most trivial 
transactions, payments are made among us universally either by 
means of paper representatives of money or by checks drawn on 
banks. In this respect our habits differ widely from those of 
any other people under the sun. Our British brethren resemble 
us in this particular more nearly than any other people on the 


224 Proceedings of The American Metrological Society. 


other side of the Atlantic ; but even among them no notes are in 
circulation below the value of five pounds in England, or below 
one pound in Scotland and Ireland. The consequence is that 
while, from the official reports transmitted to our government 
by Mr. Lowell on the monetary condition of the United Kingdom, 
it appears that the total amount of gold coin and bullion in the 
kingdom was equal, in May last, to £135,613,000, only £28,739,000 
of this was in the banks; leaving, consequently, in circulation 
among the people £106,800,000, or more than $534,000,000. ‘The 
entire amount of the circulation in the form of bank-notes at the 
same time was £35,464,047, equal to $177,320,235. 


In the United States it appears, from the report of the director 
of the mint, that, in October last there was in the treasury and 
in the banks the sum of $174,944,791 in gold coin, while there 
_ was estimated to be $200,379,138 in private hands. On the other 
hand, in paper we had, according to the report of the comptroller 
of the currency, on the 31st August last, $697,757,809. Thus our 
gold coin in the hands of the people was less than two-fifths of 
that of England, though our population exceeds that of the United 
Kingdom by nearly 20,000,000, while our paper circulation is 
about four times as great as that of Great Britain. It appears also 
that our cash reserve, not counting silver, to secure the redemp- 
tion of the paper currency, is but about one dollar to four. The 
cash reserve of England is proportionally larger, but this reserve 
in the present statement is unusually large; it is often drawn 
down to half the amount; and as it is mainly in the Bank of 
England, where all the other joint-stock banks and bankers keep 
their deposits, it is, as Mr. Bagehot has pointed out, the sole 
guaranty which exists for the safety of British credit. 


It appears from the foregoing that the gold coin in circulation 
among the people in Great Britain is equal to seventeen dollars 
per head of the entire population; while that in the United States 
is but four dollars a head. Also, that the paper circulation in 
Great Britain is less than six dollars a head, while in the United 
States it is fourteen dollars per head. 


On the Continent of Europe there is scarcely any paper money 
in circulation, except in countries which have suspended specie 


Proceedings of The American Metrological Society. 225 


payments. Nor on the Continent is it customary as in England 
and in the United States, for individuals to keep their money on 
deposit in banks and to make payments by check. It follows that 
the need of a Continental people for current coin is immensely 
greater than that of a population like ours; since they carry upon 
their persons or keep about their dwellings all the money they 
can save, while we do nothing of the kind. 


This Continental peculiarity has been accounted for, and prob- 
ably with justice, by the consideration that, for centuries, the 
Continent of Europe has been the theatre, with intervals of un- 
certain tranquility, of military operations, in which occupation 
and spoliation went along together, and treasure accumulated in 
the vaults of a bank was only so much the more conveniently 
placed under the hand of the spoiler. Men have been accus- 
tomed to feel, therefore, that there is no safety for personal 
property but that which the individual may be able to provide 
for himself ; and they, therefore, prefer to keep their money 
about them. 

The Director of the Mint gives for France in November, 1878, 
the amount of gold in circulation as $927,000,000 ; besides nearly 
$600,000,000 of silver. The population of France is about 36,- 
000,000, which gives about twenty-six dollars of gold and seven- 
teen dollars of silver as the average to each individual. This far 
exceeds any possible wants of a people like ours. 


Unless the habits of our people greatly change, therefore, of 
which there is no probabillty, we shall always be able to com- 
mand gold enough for our purposes. Butif it should fall out 
otherwise, and we should find, in the competition among nations 
for the possession of the more precious, that our gold is slipping 
from us, we need not fear that in any event, we shall be left 
without money. Great as may be the inconvenience attending 
the change, we may always cast in our lot with the poorer and 
weaker nations, and accept silver as our medium of exchange 
and our standard of value. Except for its cumbrousness and 
lack of portability, silver is as capable of subserving the purposes 
of money as gold. But this is true only on the supposition that 
silver in the coniage is estimated at its true value in relation to 


226 Proceedings of The American Metrological Society. 


other commodities. If an attempt is made by legislation to give 
to silver coin an artificial value above that which it is able to 
command as bullion in the markets of the world, and to make it 
at the same time universally a legal tender, the experiment of a 
money of silver only will prove a disastrous failure. The reason 
why, at this time, there is what is called a silver question at all, 
is that the advocates of silver remonetization are not content 
with making silver a real money for what it is worth, but demand 
at the same time that it shall be current for a good deal more 
than it is worth. 


Nor it will be an experiment attended with results any more 
successful, to attempt to use both silver and gold together, and to 
make each of the metals interchangeably and equally a standard of 
value. As neither of the metals preserves unchangeably through 
long periods of time a constant value in reference to commodities 
in general, so neither they do preserve a constant relation of 
value to each other. The bimetallists assert that, in point of fact, 
a double standard has existed among certain peoples for several 
centuries ; but the only basis of truth which exists for this asser- 
tion is the fact, that laws have existed sanctioning the double 
standard, while under these laws, and in spite of them, but a 
single standard has ever existed in point of fact for any appreci- 
able length of time. Under double standard laws, the relation 
between the commercial values of the metals always has deter- 
mined and always must determine which shall be the actual 
standard, the cheaper metal expelling the dearer as effectually 
as if it had been suppressed by law. 


The monetary history of Great Britain for a period of more 
then four centuries, during which she vainly strove to maintain 
the double standard, affords conclusive evidence of this truth, 
The ratio of value between gold and silver was fixed by Edward 
TIL. in 1345 at 1:122 nearly. At this rate gold could not be 
forced into the circulation, and he subsequently changed it to 
1:114. Even this proved ineffectual and the same monarch 
changed the ratio twice additionally before the close of his reign. 
Henry IV. half a century later fixed the ratio at 1: 1(4, the lowest 
known to Brirish annals while the policy was adhered to of 


Proceedings of The American Metrological Soctety. 227 


- endeavoring to conform the legal to the commercial ratio of 
But Henry VIII. and his son Edward VI. whose notions 
of the power of law to create a value where it does not exist, 
were quite as pronounced as of those of Mr. Henri Cernuschi in 
our own day, issued a series of decrees, in accordance with which 
the legal value of the gold and silver in the coinage of England 
stood related to each other successively as follows: 


values. 


In 36th Henry VIII., Silver was to Goldas 1 : 6; 
el (73 37th 73 73 “c 73 “ 6c “ec ] : 5 
kd Bdward VL, 2%). As OT 
6c 4th (73 ““ Pas “ce 6“ (73 <3 1 -4 g 
“cs 5th 79 “é “sc “cc 6c “cc 6c sf : 2294 
The consequence of this was of course inevitable. ‘It followed,”’ 


says Lord Liverpool, “that all the gold was either hoarded, melt- 
ed, exported, or in some way driven out of circulation.” 


Disregarding these extravagancies, however, it may be said that 
repeated changes were found necessary in the ratio of value be- 
tween the metals in the coinage down to the accession of George 
L, early in the eighteenth century, when the struggle to maintain 
both metals in the coinage was abandoned, and silver ceased to 
be used in England except for petty retail traffic. The story is 
worth telling in a little more detail. 


During the reigns of James I. and Charles I. this struggle was 


very energetic. 


It ceased temporarily to occupy attention under 


stress of more urgent affairs, during the great rebellion and the 
Commonwealth. But after the Restoration, and down to the ac- 
cession of William of Orange, it went on actively, one metal or 
the other disappearing from circulation after every fresh effort to 
prevent this annoying result. The two monarchs named above, 
in addition to employing the natural means of accomplishing 
their object, that is, endeavoring to conform the legal ratio of 
values accurately to the commercial ratio, invoked the terrors of 
the penal law and exercised all the powers of the High Court of 
Star Chamber to deter men from the grave misdemeanor of 
melting down coin or carrying it out of the kingdom. 


Throughout the greater part of her reign Elizabeth maintained 
the legal ratio between the metals at 1:11,5,. In her 43d year 
she changed this to 1:108;. Gold was apparently falling, but 


228 . Proceedings of The American Metrological Society. — 


directly after the accession of her successor, it took an upward 
turn which presently caused this metal to be as actively melted 
up and exported as it had been under Edward VI. In order to 
check or arrest this evil, the king in his second year diminished 
the weight of the gold coin by about ten per cent. ; reducing the 
ratio from about 1:11, where Elizabeth had left it, to 1:12. But 
this not sufficing, in less than five years he reduced it again from 
1:12 to 1:13. The total actual rise was in all more than 21 per 
cent. But in this last advance he overdid the matter, and silver 
now began to be exported or melted as gold had been before. 
The sovereigns of diminished weight issued under the first of 
these changes, in order to distinguish them from those previously 
coined, were called wnites, though still rated at 20 shillings. But 
after the second reduction, to prevent the future exportation of 
the unites, they were declared to be legal tender for 22 shillings. 
In consequence of this over-valuation of gold, silver became 
exceedingly scarcely, and very little was brought to the mint 
for coinage. The king therefore resorted to measures of severity 
in the hope of stopping the exportation of the precious metals 
which went on rapidly ; and by a proclamation of 1614 setting 
forth “that great quantities of gold and silver are continually 
carried forth into forraigne parts, not only for the supply of com- 
merce in respect of the excesse of forraigne commodities (which ig 
a thing itselfe intolerable), but also upon secret and subtle gaines 
made at the mints abroad, which artifices as he does not approve, 
nor much lesse emulate, but is desirous to frustrate,” ordered that 
the statutes made and in force against the exportation of gold or 
silver in coin, jewels, plate, or vessels, or howsoever, should be 
strictly executed under the severest penalties. Three years 
afterward the Privy Council made a curious attempt to control 
the laws of commercial exchange by issuing an order requir- 
ing the East India Company and the Goldsmith’s Company to 
bind themselves under penalties not to pay more for silver than 
the mint price. In 1618 another proclamation wasissued by the 
king, in which he complained that “the drawing of moneys into 
the goldsmith’s hand, by turning silver into gold upon profit of 
exchange, doth make it the more ready to be ingrossed into the 
merchant’s hand for transportation to mints abroad,” and pro- 


_ Proceedings of The American Metrological Society. 229 


hibited the melting down of the gold or silver coin of the realm. 
Four years later he complained in another proclamation that his 
previous injunctions had been disregarded, “notwithstanding 
some remarkable examples of justice in his High Court of Star 
Chamber,” and prohibited the exportation not only of coin but 
of bullion, and further made it penal to sell gold or silver bullion 
to any person except “the officers of his Majesty’s mint and 
changes.” He also prohibited certain manufactures requiring 
the use of the precious metals. And later, in 1624, he renewed 
the prohibition to any person to sell gold or silver “ except to the 
officers of the mint and changes,” and ordered that “no refiner 
sell to any person any manner of silver in mass,” and that “no 
goldsmith sell any fine silver allayed or molten into mass to any 
person or persons whatever, nor one goldsmith to another.” 


Charles I., after his accession, persisted in the repressive mea- 
sures employed by his father, and to render them more effectual 
revived the ancient office of King’s Exchanger, appointing the 
Earl of Holland to fill the same, issuing at the same time a decree 
“that no person except the said Earl of Holland should presume 
to exchange or buy any manner of bullion, in any species of 
foreign coin or in ingots, or in any other form whatever.” In 
1636 a decree of the Court of Star Chamber sentenced seven 
persons convicted of culling out the heavier of the coins of the 
realm and melting them down and exporting the same, as well as 
foreign coin and bullion, to foreign parts, to pay £8,100 fine and 
to be imprisoned in the Fleet till their fines were paid. This kind 
of traffic is said to have been pursued by certain individuals with 
a profit of seven or eight thousand pounds per annum. Yet 
these proclamations were all in vain, and these severities pro- 
duced no practical effect whatever. Violett, a contemporary 
writer, states in a public document* that £30,000 in the minor 
coin of the realm were melted annually by a single goldsmith for 
six successive years, from 1624’ to 1630. The same author adds 
that throughout all the reign of this monarch, and in defiance of 
royal menaces and Star Chamber decrees, “silver sold constantly 
in London at one, two, and three pence per ounce above the 


* Violett’s proposals to Oliver Cromwell, 1665 ; cited by Liverpool. 


230 Proceedings of The American Metrological Society. — 


mint price.” This was the experience of England under the — 
double standard before the Commonwealth. , Bie 


After the restoration, though the struggle to maintain the 
double standard continued, and though consequently one metal — 
or the other (usually the gold) was constantly driven out of 
circulation, the people at length, disregarding law, paid and re- — 
ceived gold coins according to their actual silver value as bullion, — 
and not according to their legal value, and thus the guineas of 
Charles IL, originally issued at 20 shillings, passed at 21, 22 and 
more—even finally at not less than thirty shillings. Meantime 
the silver coinage fell into a deplorable condition, the coins hay- 
ing been clipped and worn until they had lost half their weight, 
and under William III. a general recoinage took place. At this 
time the real value of the guinea in the new silver was only 20s. 
8d. while it was passing current at 21s. 6d. Its legal tender 
currency was reduced to 21s., at which it remained fixed. But 
as this reduction was not sufficient, silver was largely exported 
and soon ceased to be, what it had been for seven hundred years 
before, the practical standard of value in England. In 1774 the 
law at length recognized the impossibility of maintaining two 
different standards side by side, and silver was made legal tender 
only for sums not exceeding twenty-five pounds sterling. In 1817 — 
this legal tender limit was reduced to forty shillings, and the ~ 
silver coinage of England has since consisted only of tokens hav- — 
ing a real value materially less than that for which they pass 
current 

We ourselves have also had a century of experience of the 
folly of attempting to maintain a double standard. If then silver 
is to be the money of the future in the United States, let it be 
the only standard money; let it be coined at its actual value, and 
let gold be subsidiary or as far as it may be used at all, let it — 
pass as it did in England after the Commonwealth, “ according 
to the current rates.” 


